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O’Reilly Automotive, Inc. Reports Second Quarter 2021 Results

  • Second quarter comparable store sales increase of 9.9%
  • 16% two-year compound growth in second quarter revenue
  • 17% increase in second quarter diluted earnings per share, year-to-date increase of 39%

SPRINGFIELD, Mo., July 28, 2021 (GLOBE NEWSWIRE) -- O’Reilly Automotive, Inc. (the “Company” or “O’Reilly”) (Nasdaq: ORLY), a leading retailer in the automotive aftermarket industry, today announced record revenue and earnings for its second quarter ended June 30, 2021, and announced the future retirement and leadership succession plan for Jeff Shaw, COO and Co-President.

2nd Quarter Financial Results
Greg Johnson, O’Reilly’s CEO and Co-President, commented, “We are pleased to report another outstanding quarter, especially as our Team faced very difficult comparisons to our extremely strong results in the second quarter last year. Team O’Reilly continues to deliver consistently outstanding service to our customers and produce record-breaking financial results, highlighted by our 9.9% increase in comparable store sales for the quarter, on top of a 16.2% increase in the prior year. We are also proud of our Team’s ability to deliver profitable growth, leveraging our strong top-line results to drive second quarter diluted earnings per share of $8.33, which was a 17% increase over the prior year and on top of the 57% increase in earnings per share we delivered in the second quarter of 2020. I would like to take this opportunity to thank our over 79,000 Team Members for their incredible hard work and unwavering dedication to safety, while providing excellent customer service, which has been so crucial to our customers during the pandemic.”

Sales for the second quarter ended June 30, 2021, increased $374 million, or 12%, to $3.47 billion from $3.09 billion for the same period one year ago. Gross profit for the second quarter increased 12% to $1.83 billion (or 52.7% of sales) from $1.64 billion (or 53.0% of sales) for the same period one year ago. Selling, general and administrative expenses (“SG&A”) for the second quarter increased 14% to $1.03 billion (or 29.7% of sales) from $901 million (or 29.1% of sales) for the same period one year ago. Operating income for the second quarter increased 8% to $796 million (or 23.0% of sales) from $736 million (or 23.8% of sales) for the same period one year ago.

Net income for the second quarter ended June 30, 2021, increased $54 million, or 10%, to $585 million (or 16.9% of sales) from $532 million (or 17.2% of sales) for the same period one year ago. Diluted earnings per common share for the second quarter increased 17% to $8.33 on 70 million shares versus $7.10 on 75 million shares for the same period one year ago.

Year-to-Date Financial Results
Mr. Johnson added, “Our Team’s unwavering commitment to our customers in the first half of 2021 drove a 16.5% increase in comparable store sales, a 28% increase in operating profit dollars and a 39% increase in diluted earnings per share. Our continued strong sales results in 2021 are the product of strong execution of our dual market strategy, combined with a beneficial industry backdrop, augmented by favorable weather trends, and the significant positive impact from the last round of government stimulus starting at the end of our first quarter. Even as the tailwind from the stimulus benefits moderated in May and June, we have remained very pleased with our Team’s ability to sustain year-over-year increases in sales volumes despite the very difficult comparisons to the prior year. Our better-than-expected sales volumes in May and June have continued thus far in July. As a result of our second quarter performance and strong start to our third quarter, coupled with our confidence in Team O’Reilly’s ability to provide industry-leading customer service, we are raising our full-year 2021 guidance for comparable store sales from a range of 1% to 3% to a range of 5% to 7%. We are also increasing our full-year diluted earnings per share guidance to a range of $26.80 to $27.00, which represents an increase of $2.05 at the midpoint from our previously provided guidance.”

Sales for the first six months of 2021 increased $988 million, or 18%, to $6.56 billion from $5.57 billion for the same period one year ago. Gross profit for the first six months of 2021 increased 18% to $3.47 billion (or 52.9% of sales) from $2.93 billion (or 52.7% of sales) for the same period one year ago. SG&A for the first six months of 2021 increased 12% to $1.98 billion (or 30.2% of sales) from $1.77 billion (or 31.8% of sales) for the same period one year ago. Operating income for the first six months of 2021 increased 28% to $1.49 billion (or 22.7% of sales) from $1.16 billion (or 20.8% of sales) for the same period one year ago.

Net income for the first six months of 2021 increased $255 million, or 31%, to $1.09 billion (or 16.6% of sales) from $832 million (or 14.9% of sales) for the same period one year ago. Diluted earnings per common share for the first six months of 2021 increased 39% to $15.39 on 71 million shares versus $11.06 on 75 million shares for the same period one year ago.

2nd Quarter Comparable Store Sales Results
Comparable store sales are calculated based on the change in sales for U.S. stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores and sales to Team Members, as well as sales from Leap Day for the six months ended June 30, 2020. Online sales, resulting from ship-to-home orders and pick-up-in-store orders for U.S. stores open at least one year, are included in the comparable store sales calculation. Comparable store sales increased 9.9% for the second quarter ended June 30, 2021, on top of 16.2% for the same period one year ago. Comparable stores sales increased 16.5% for the six months ended June 30, 2021, on top of 7.5% for the same period one year ago.

Share Repurchase Program
During the second quarter ended June 30, 2021, the Company repurchased 0.7 million shares of its common stock, at an average price per share of $537.25, for a total investment of $400 million. During the first six months of 2021, the Company repurchased 2.2 million shares of its common stock, at an average price per share of $479.69, for a total investment of $1.06 billion. Subsequent to the end of the second quarter and through the date of this release, the Company repurchased an additional 0.2 million shares of its common stock, at an average price per share of $591.06, for a total investment of $114 million. The Company has repurchased a total of 83.4 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through the date of this release, at an average price of $185.14, for a total aggregate investment of $15.45 billion.   As of the date of this release, the Company had approximately $1.80 billion remaining under its current share repurchase authorizations.

Updated Full-Year 2021 Guidance
The Company still anticipates potentially significant volatility in its results, driven by the ongoing uncertainty related to the pandemic, and will update full-year guidance during 2021, as appropriate, and if needed. The table below outlines the Company’s updated guidance for selected full-year 2021 financial data:

   
     For the Year Ending
  December 31, 2021
Comparable store sales 5% to 7%
Total revenue $12.3 billion to $12.6 billion
Gross profit as a percentage of sales 52.2% to 52.7%
Operating income as a percentage of sales 20.5% to 20.9%
Effective income tax rate 23.0%
Diluted earnings per share (1) $26.80 to $27.00
Net cash provided by operating activities $2.2 billion to $2.7 billion
Capital expenditures $550 million to $650 million
Free cash flow (2) $1.5 billion to $1.8 billion

(1) Weighted-average shares outstanding, assuming dilution, used in the denominator of this calculation, includes share repurchases made by the Company through the date of this release.

(2) Free cash flow is a non-GAAP financial measure. The table below reconciles Free cash flow guidance to Net cash provided by operating activities guidance, the most directly comparable GAAP financial measure:

          
     For the Year Ending
(in millions) December 31, 2021
Net cash provided by operating activities $2,245 to $2,670
Less:Capital expenditures  550 to  650
 Excess tax benefit from share-based compensation payments  15 to  20
 Investment in tax credit equity investments  180 to  200
Free cash flow $1,500 to $1,800


Jeff Shaw, COO and Co-President, Retirement and Leadership Succession
“After more than 33 years of dedicated service to O’Reilly, Jeff Shaw has decided to retire, effective in early 2022,” stated Mr. Johnson. “Jeff is an outstanding leader and mentor, and he has been a critical part of our Company’s incredible success and profitable growth during his tenure. He is extremely passionate about providing consistent, top-notch customer service and has relentlessly perpetuated this focus in every member of his Team. Jeff has been a champion of executing the Company’s ‘promote from within’ philosophy, and he has personally trained and mentored many of O’Reilly’s current senior leadership team, including identifying and preparing for his own retirement and succession. I would like to express my sincere appreciation to Jeff for his incredible contributions to O’Reilly’s success, and we all wish Jeff and his family a very happy and well deserved retirement.”

Mr. Shaw has been an O’Reilly Team Member for over 33 years, beginning his career as a Parts Specialist and progressing through the roles of Store Manager, District Manager, Regional Manager, Divisional Vice President, Vice President of the Southern Division, Vice President of Sales and Operations, Senior Vice President of Sales and Operations, Executive Vice President of Store Operations and Sales, and Co-President, and was promoted to his current role of COO and Co-President on May 8, 2018. In his current role, Mr. Shaw’s primary areas of responsibility are Store Operations, Sales, Distribution Operations and International Operations.

Mr. Johnson continued, “Thanks to Jeff’s focus on succession planning, we are very pleased to announce that Brad Beckham, O’Reilly’s Executive Vice President of Store Operations and Sales, will be promoted to the position of Executive Vice President and Chief Operating Officer at the time of Jeff’s retirement. Brad has been an O’Reilly Team Member for over 24 years, beginning his career as a Parts Specialist and, through his dedication and hard work, has been promoted up through the organization. Brad is a very experienced operator and exceptional leader and shares Jeff’s passion for providing excellent customer service, and I am confident he is well prepared to help lead our Company to success long into the future.”

At the time of Mr. Shaw’s retirement, his leadership and operational responsibilities will be transitioned to Mr. Beckham and to Brent Kirby, O’Reilly’s Executive Vice President of Supply Chain.

Jeff Shaw commented, “It has been an honor to have worked with so many great people at O’Reilly for these past 30 plus years, and I am extremely grateful for all of the opportunities provided to me by our Company during my career. While I will miss working with the Team every day, I could not be more pleased to have been a part of the Company’s past success, and I am extremely confident that Brad is ready to step into his new role. Brad is an extremely talented and well respected leader and will ensure O’Reilly’s focus on providing top-notch service to our customers will continue long into the future.”

Non-GAAP Information
This release contains certain financial information not derived in accordance with United States generally accepted accounting principles (“GAAP”). These items include adjusted debt to earnings before interest, taxes, depreciation, amortization, share-based compensation and rent (“EBITDAR”) and free cash flow. The Company does not, nor does it suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. The Company believes that the presentation of adjusted debt to EBITDAR and free cash flow provide meaningful supplemental information to both management and investors that is indicative of the Company’s core operations. The Company has included a reconciliation of this additional information to the most comparable GAAP measure in the table above and the selected financial information below.

Earnings Conference Call Information
The Company will host a conference call on Thursday, July 29, 2021, at 10:00 a.m. Central Time to discuss its results as well as future expectations. Investors may listen to the conference call live on the Company’s website at www.OReillyAuto.com by clicking on “Investor Relations” and then “News Room.” Interested analysts are invited to join the call. The dial-in number for the call is (703) 375-5524 and the conference call identification number is 8385407. A replay of the conference call will be available on the Company’s website through Thursday, July 28, 2022.

About O’Reilly Automotive, Inc.
O’Reilly Automotive, Inc. was founded in 1957 by the O’Reilly family and is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, serving both the do-it-yourself and professional service provider markets. Visit the Company’s website at www.OReillyAuto.com for additional information about O’Reilly, including access to online shopping and current promotions, store locations, hours and services, employment opportunities and other programs. As of June 30, 2021, the Company operated 5,710 stores in 47 U.S. states and 22 stores in Mexico.

Forward-Looking Statements
The Company claims the protection of the safe-harbor for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as “estimate,” “may,” “could,” “will,” “believe,” “expect,” “would,” “consider,” “should,” “anticipate,” “project,” “plan,” “intend” or similar words. In addition, statements contained within this press release that are not historical facts are forward-looking statements, such as statements discussing, among other things, expected growth, store development, integration and expansion strategy, business strategies, future revenues and future performance. These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events and results. Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, the COVID-19 pandemic or other public health crises; the economy in general; inflation; consumer debt levels; product demand; the market for auto parts; competition; weather; tariffs; availability of key products; business interruptions, including terrorist activities, war and the threat of war; failure to protect our brand and reputation; challenges in international markets; volatility of the market price of our common stock; our increased debt levels; credit ratings on public debt; historical growth rate sustainability; our ability to hire and retain qualified employees; risks associated with the performance of acquired businesses; information security and cyber-attacks; and governmental regulations. Actual results may materially differ from anticipated results described or implied in these forward-looking statements. Please refer to the “Risk Factors” section of the annual report on Form 10-K for the year ended December 31, 2020, and subsequent Securities and Exchange Commission filings for additional factors that could materially affect the Company’s financial performance. Forward-looking statements speak only as of the date they were made and the Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

  
For further information contact:Investor & Media Contacts
 Mark Merz (417) 829-5878
 Eric Bird (417) 868-4259


O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

          
  June 30, 2021 June 30, 2020 December 31, 2020
     (Unaudited)    (Unaudited)    (Note)
Assets         
Current assets:         
Cash and cash equivalents $ 631,618  $872,423  $465,640 
Accounts receivable, net   273,148   243,660   229,679 
Amounts receivable from suppliers   113,174   86,513   100,615 
Inventory   3,647,413   3,528,683   3,653,195 
Other current assets   72,994   53,206   50,658 
Total current assets   4,738,347   4,784,485   4,499,787 
          
Property and equipment, at cost   6,767,596   6,403,936   6,559,911 
Less: accumulated depreciation and amortization   2,603,442   2,365,453   2,464,993 
Net property and equipment   4,164,154   4,038,483   4,094,918 
          
Operating lease, right-of-use assets   2,028,329   1,926,270   1,995,127 
Goodwill   881,207   872,997   881,030 
Other assets, net   137,296   106,300   125,780 
Total assets $ 11,949,333  $11,728,535  $11,596,642 
          
Liabilities and shareholders’ equity          
Current liabilities:         
Accounts payable $ 4,583,570  $3,936,400  $4,184,662 
Self-insurance reserves   118,259   90,890   109,199 
Accrued payroll   129,025   107,116   88,875 
Accrued benefits and withholdings   221,382   140,446   242,724 
Income taxes payable   29,776   91,797   16,786 
Current portion of operating lease liabilities   333,624   318,601   322,778 
Other current liabilities   355,976   336,886   297,393 
Total current liabilities   5,771,612   5,022,136   5,262,417 
          
Long-term debt   3,825,177   4,127,397   4,123,217 
Operating lease liabilities, less current portion   1,747,267   1,652,284   1,718,691 
Deferred income taxes   177,118   155,530   155,899 
Other liabilities   210,465   182,088   196,160 
          
Shareholders’ equity:         
Common stock, $0.01 par value:         
Authorized shares – 245,000,000         
Issued and outstanding shares –         
69,132,589 as of June 30, 2021, and         
74,097,706 as of June 30, 2020, and         
71,123,109 as of December 31, 2020   691   741   711 
Additional paid-in capital   1,295,363   1,289,976   1,280,841 
Retained deficit   (1,075,769)  (679,506)  (1,139,139)
Accumulated other comprehensive loss   (2,591)  (22,111)  (2,155)
Total shareholders’ equity   217,694   589,100   140,258 
          
Total liabilities and shareholders’ equity $ 11,949,333  $11,728,535  $11,596,642 

Note: The balance sheet at December 31, 2020, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.


O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

             
  For the Three Months Ended  For the Six Months Ended
  June 30,  June 30, 
     2021     2020     2021     2020 
Sales $ 3,465,601  $3,091,595  $ 6,556,500  $5,568,082 
Cost of goods sold, including warehouse and distribution expenses   1,639,223   1,454,415    3,089,327   2,634,996 
Gross profit   1,826,378   1,637,180    3,467,173   2,933,086 
             
Selling, general and administrative expenses   1,030,795   900,690    1,980,485   1,773,035 
Operating income   795,583   736,490    1,486,688   1,160,051 
             
Other income (expense):                
Interest expense   (37,657)  (41,723)   (75,163)  (81,109)
Interest income   456   635    993   1,310 
Other, net   2,952   5,008    4,643   (182)
Total other expense   (34,249)  (36,080)   (69,527)  (79,981)
             
Income before income taxes   761,334   700,410    1,417,161   1,080,070 
Provision for income taxes   175,883   168,743    330,101   247,965 
Net income $ 585,451  $531,667  $ 1,087,060  $832,105 
             
Earnings per share-basic:                
Earnings per share $ 8.41  $7.16  $ 15.53  $11.15 
Weighted-average common shares outstanding – basic   69,618   74,205    69,997   74,611 
             
Earnings per share-assuming dilution:                
Earnings per share $ 8.33  $7.10  $ 15.39  $11.06 
Weighted-average common shares outstanding – assuming dilution   70,264   74,833    70,640   75,246 


O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

       
  For the Six Months Ended
  June 30, 
     2021     2020 
Operating activities:        
Net income $ 1,087,060  $832,105 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization of property, equipment and intangibles   158,917   151,873 
Amortization of debt discount and issuance costs   2,207   2,152 
Deferred income taxes   21,922   14,987 
Share-based compensation programs   12,575   11,480 
Other   1,382   1,906 
Changes in operating assets and liabilities:        
Accounts receivable   (45,359)  (34,966)
Inventory   6,357   (78,086)
Accounts payable   398,785   334,503 
Income taxes payable   12,408   210,855 
Other   56,578   112,269 
Net cash provided by operating activities   1,712,832   1,559,078 
       
Investing activities:        
Purchases of property and equipment   (222,607)  (244,471)
Proceeds from sale of property and equipment   4,566   4,846 
Investment in tax credit equity investments   (1,768)  (95,292)
Other   (1,083)  (311)
Net cash used in investing activities   (220,892)  (335,228)
       
Financing activities:        
Proceeds from borrowings on revolving credit facility     1,162,000 
Payments on revolving credit facility     (1,423,000)
Proceeds from the issuance of long-term debt     499,795 
Principal payments on long-term debt   (300,000)   
Payment of debt issuance costs   (3,299)  (3,840)
Repurchases of common stock   (1,064,189)  (651,027)
Net proceeds from issuance of common stock   41,921   25,593 
Other   (313)  (253)
Net cash used in financing activities   (1,325,880)  (390,732)
       
Effect of exchange rate changes on cash   (82)  (1,101)
Net increase in cash and cash equivalents   165,978   832,017 
Cash and cash equivalents at beginning of the period   465,640   40,406 
Cash and cash equivalents at end of the period $ 631,618  $872,423 
       
Supplemental disclosures of cash flow information:        
Income taxes paid $ 292,673  $20,187 
Interest paid, net of capitalized interest   76,788   73,091 


O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
(Unaudited)

        
  For the Twelve Months Ended
  June 30, 
Adjusted Debt to EBITDAR:    2021    2020
(In thousands, except adjusted debt to EBITDAR ratio)        
GAAP debt $ 3,825,177 $4,127,397
Add:Letters of credit   84,045  51,551
 Discount on senior notes   4,700  3,295
 Debt issuance costs   20,123  19,308
 Six-times rent expense   2,182,596  2,073,180
Adjusted debt $ 6,116,641 $6,274,731
       
GAAP net income $ 2,007,257 $1,548,314
Add:Interest expense   155,180  152,255
 Provision for income taxes   596,239  442,962
 Depreciation and amortization   321,679  290,473
 Share-based compensation expense   23,842  22,386
 Rent expense (i)   363,766  345,530
EBITDAR $ 3,467,963 $2,801,920
       
Adjusted debt to EBITDAR   1.76  2.24

(i) The table below outlines the calculation of Rent expense and reconciles Rent expense to Total lease cost, per ASC 842, the most directly comparable GAAP financial measure, for the twelve months ended June 30, 2021 and 2020 (in thousands):

      
 Total lease cost, per ASC 842, for the twelve months ended June 30, 2021     $432,619
 Less:Variable non-contract operating lease components, related to property taxes and insurance, for the twelve months ended June 30, 2021  68,853
 Rent expense for the twelve months ended June 30, 2021  $363,766
      
 Total lease cost, per ASC 842, for the twelve months ended June 30, 2020  $408,583
 Less:Variable non-contract operating lease components, related to property taxes and insurance, for the twelve months ended June 30, 2020  63,053
 Rent expense for the twelve months ended June 30, 2020  $345,530


         
  June 30, 
     2021 2020
Selected Balance Sheet Ratios:          
Inventory turnover (1)   1.7  1.5
Average inventory per store (in thousands) (2) $ 636 $632
Accounts payable to inventory (3)   125.7%  111.6%


              
   For the Three Months Ended  For the Six Months Ended
   June 30,  June 30, 
      2021    2020    2021    2020
Reconciliation of Free Cash Flow (in thousands):                
Net cash provided by operating activities $ 822,160 $1,099,985 $ 1,712,832 $1,559,078
Less:Capital expenditures   127,728  111,187   222,607  244,471
 Excess tax benefit from share-based compensation payments   10,808  3,080   16,815  6,460
 Investment in tax credit equity investments   1,762  33   1,768  95,292
Free cash flow $ 681,862 $985,685 $ 1,471,642 $1,212,855


             
  For the Three Months Ended  For the Six Months Ended  For the Twelve Months Ended
  June 30,  June 30,  June 30, 
     2021    2020    2021    2020     2021     2020 
Store Count:            
Beginning domestic store count  5,660 5,512  5,594  5,439   5,562  5,344 
New stores opened  50 50  118  126   159  221 
Stores closed    (2) (3)  (11) (3)
Ending domestic store count  5,710 5,562  5,710  5,562   5,710  5,562 
             
Mexico stores  22 21  22  21   22  21 
Ending total store count  5,732 5,583  5,732  5,583   5,732  5,583 


             
  For the Three Months Ended  For the Twelve Months Ended
  June 30,  June 30, 
     2021    2020    2021    2020
Store and Team Member Information: (4)            
Total employment   79,170  72,877       
Square footage (in thousands)   42,714  41,318      
Sales per weighted-average square foot (5) $ 80.35 $74.18 $ 295.60 $262.03
Sales per weighted-average store (in thousands) (6) $ 600 $551 $ 2,202 $1,940

(1) Calculated as cost of goods sold for the last 12 months divided by average inventory. Average inventory is calculated as the average of inventory for the trailing four quarters used in determining the denominator.

(2) Calculated as inventory divided by store count at the end of the reported period.

(3) Calculated as accounts payable divided by inventory.

(4) Represents O’Reilly’s U.S. operations only.

(5) Calculated as sales less jobber sales, divided by weighted-average square footage. Weighted-average square footage is determined by weighting store square footage based on the approximate dates of store openings, acquisitions, expansions or closures.

(6) Calculated as sales less jobber sales, divided by weighted-average stores. Weighted-average stores is determined by weighting stores based on their approximate dates of openings, acquisitions or closures.


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